|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
High Court of Australia |
PERRI v. COOLANGATTA INVESTMENTS PTY. LTD. [1982] HCA 29; (1982) 149 CLR 537
Vendor and Purchaser
High Court of Australia
Gibbs C.J.(1), Stephen(2), Mason(3), Wilson(4) and Brennan(5) JJ.
CATCHWORDS
Vendor and Purchaser - Contract of sale - Time for completion not stipulated - Condition making contract subject to purchaser's completing sale of other property - Character of condition - Implied term that purchaser should complete sale of other property within reasonable time - Vendor's right to rescind - Whether dependent upon notice requiring purchaser to complete or fulfil condition.
HEARING
1982, February 16; May 11. 11:5:1982DECISION
May 11.2. The appellants did not enter into a contract for the sale of their property at Lilli Pilli until 9 March 1979 and that contract was not completed until 13 June 1979. The learned trial judge in effect found that the appellants had not made reasonable endeavours to sell their property at an earlier date. He found that they had put the property on the market at a price that was too high and had acted unreasonably in not reducing the price to a reasonable level until January 1979. He did not make any finding as to the date on which a reasonable time for performance of special condition 6 expired, but he did find that a reasonable time had expired by 29 September 1978, when the present proceedings were commenced. Before that date the respondent had pressed the appellants to complete the contract, and had given them two notices to complete. The second of those notices was given on 17 July 1978, and required completion by 8 August 1978. When the sale had not been completed by that date the respondent on 10 August 1978 gave a notice rescinding or terminating the contract. The learned trial judge did not decide whether a reasonable time for completion had elapsed by 17 July 1978, or whether the respondent was entitled to give a notice to complete on that day, for he held that once a reasonable time for the fulfilment of special condition 6 had elapsed without that condition having been either fulfilled or waived, it was not necessary for the respondent to give a notice to complete. He accordingly declared that the contract had terminated on 29 September 1978 and ordered repayment to the appellants of the deposit. His decision was affirmed by the Court of Appeal. (at p541)
3. In my opinion special condition 6 made the completion of the sale of the property at Lilli Pilli a condition precedent to the performance of certain of the obligations of the parties under the contract, including the obligation of the respondent to complete the sale. It has sometimes proved difficult to decide whether a particular condition of a contract should be classified as a condition precedent or a condition subsequent, and as Profession Stoljar has pointed out in "The Contractual Concept of Condition", Law Quarterly Review, vol.69 (1953) 485, at p. 506, if the words "precedent" and "subsequent" are to make sense they must be connected with a definite point of reference; since they express a relationship in time, the question which must be asked is "Precedent to what? Subsequent to what?" However, provided the effect of a condition is clearly understood, its classification may be merely a matter of words. The condition in the present case was not a condition precedent to the formation of a binding contract. It is clear that a binding contract came into existence immediately upon signature, and that the parties to it were from that moment subject to certain obligations. For example, the appellants became liable to pay a deposit. Further, there was implied a promise by the appellants that they would do all that was reasonable to find a buyer for the Lilli Pilli property and to complete a sale to him. It was held in Lombardo v. Morgan [1957] VicRp 20; (1957) VR 153 that a term of that kind should be implied in a contract for the sale of land which contained a condition making the sale subject to the vendor disposing of his business within ninety days; and that decision is consistent with authority, including decisions of this Court: Butts v. O'Dwyer [1952] HCA 74; (1952) 87 CLR 267, at p 280 ; Kennedy v. Vercoe [1960] HCA 64; (1960) 105 CLR 521, at p 526 . The fact that a promise of this kind is implied is quite inconsistent with the notion that no binding contract has come into existence. (at p542)
4. In Aberfoyle Plantations Ltd. v. Cheng (1960) AC 115 , where a contract of sale was expressed to be conditional on the vendor obtaining a renewal of certain leases, it appears from the judgment of Lord Jenkins that it was thought that the condition was one on whose fulfilment the formation of a binding contract of sale depended. If that view of the condition was correct, it can only be because of particular provisions peculiar to the contract there considered. However, the correctness of what Lord Jenkins said on this point was doubted in Property and Bloodstock Ltd. v. Emerton (1968) 1 Ch 94, at p 116 , and I respectfully share those doubts. It seems to me that the condition was one on which the performance of the relevant obligations under the contract depended rather than a condition precedent to the formation of a binding contract. On the other hand in Maynard v. Goode [1926] HCA 4; (1926) 37 CLR 529 the contract of sale contained the words "And providing that the transfer of purchaser's block goes through in reasonable time". Knox and Isaacs JJ. held that this was a condition subsequent (1926) 37 CLR, at pp 536,538 . Higgins and Rich JJ., with, I think, more accuracy, said that the completion of the transfer was not a condition precedent to the operation of the agreement (1926) 37 CLR, at pp 541,544 . If it was right to say that the condition was a condition subsequent, that may have been because the contract provided for possession being given on a date which might arrive before the condition had been performed (1926) 37 CLR, at p 536 . However as Isaacs J. pointed out (1926) 37 CLR, at p 540 , in one sense the stipulation might be a condition precedent to the performance of a particular term of the contract, while in another sense it was a condition subsequent in relation to the whole contract, since the failure of the stipulation would have entitled the vendor to retire from the transaction altogether. There are other authorities which illustrate the difficulty of attaching a label to conditions of this kind. In Zieme v. Gregory [1963] VicRp 34; (1963) VR 214 and Tait v. Bonnice [1975] VicRp 9; (1975) VR 102 conditions making the contract conditional upon the purchaser obtaining a loan were held to be conditions subsequent, whereas in Scott v. Rania (1966) NZLR 527 a similar condition was held to be a condition precedent to the formation of a binding contract. The latter case accepted the view taken in Aberfoyle Plantations Ltd. v. Cheng that no binding contract came into existence until the condition was fulfilled. That view must, as I have indicated, depend on particular terms of the contract; on the other hand, the description of the condition as a condition subsequent may be a mere matter of terminology, and may reflect an unwillingness to describe a condition as a condition precedent unless the formation of a binding contract depends on its fulfilment. Nevertheless, it probably does not matter in the present case whether the condition is described as "precedent" or "subsequent", provided that it is understood that its non-fulfilment did not prevent a binding contract from coming into existence but did have the effect that the respondent was under no obligation to complete the sale unless the condition was fulfilled or waived. (at p543)
5. Special condition 6 did not fix any time within which the sale of the property at Lilli Pilli was to be completed, nor did it fix a date for completion of the sale. In Aberfoyle Plantations Ltd. v. Cheng (1960) AC, at p 124 it was said that in such a case the condition must be fulfilled within a reasonable time. This statement is clearly correct; it is entirely consistent with the principle that "An implication of a reasonable time when none is expressly limited is, in general, to be made unless there are indications to the contrary": Reid v. Moreland Timber Co. Pty. Ltd. [1946] HCA 48; (1946) 73 CLR 1, at p 13 . (at p543)
6. The condition was in my opinion one for the benefit of the appellants, who were therefore entitled to waive it, but since there was no waiver before proceedings were commenced that question need not be further considered. (at p543)
7. Although by September 1978 a reasonable time had elapsed, the condition had not then been fulfilled. The question then arises whether the respondent was entitled to terminate the contract without first giving to the appellants a notice requiring them to fulfil the condition, or to perform the contract, within a reasonable time. Aberfoyle Plantations Ltd. v. Cheng is authority that no notice is necessary when the contract, expressly or by implication, fixes a date by which the condition is to be fulfilled. Their Lordships laid down the rule applicable to such a case as follows (1960) AC, at p 125 : "where a conditional contract of sale fixes (whether specifically or by reference to the date fixed for completion) the date by which the condition is to be fulfilled, then the date so fixed must be strictly adhered to, and the time allowed is not to be extended by reference to equitable principles." Their Lordships did not explain why equitable principles are inapplicable. The explanation given by Professor Treitel, in his work on The Law of Contract 4th ed. (1975), p. 570, is that the equitable principle that time is not of the essence of the contract does not apply, because "until the condition is performed the whole existence of the contract remains in doubt". However, their Lordships went on to say that if they had accepted counsel's argument that the vendor was entitled to a reasonable time to fulfil the condition, they would have been disposed to agree that time, not being originally of the essence of the contract, could not be made so by service of a notice when the vendor had not been guilty of any delay or default such as had to be shown in order to entitle the purchaser to serve such a notice (1960) AC, at p 128 . Those observations, as Cooke J. said in Hunt v. Wilson (1978) 2 NZLR 261, at p 271 "certainly tend towards the view that, if no time is fixed for completion and a condition is to be satisfied within a reasonable time, the equitable requirements as to notice apply". Again, however, their Lordships did not explain why the equitable principles might apply in the one case but not in the other. (at p544)
8. In Maynard v. Goode (1926) 37 CLR, at p 542 , Higgins J. said that he strongly thought "that a right to put an end to the contract or to refuse to perform it would not arise thereunder automatically without some warning notice from the vendor, fixing a reasonable limit of time for completion." Isaacs J. may have been of a similar opinion (1926) 37 CLR, at pp 539-540 . These remarks were obiter, because in that case it was held that the condition was performed within a reasonable time. (at p544)
9. In Gange v. Sullivan [1966] HCA 55; (1966) 116 CLR 418 a contract for sale contained a
provision that the contract was subject
to the purchaser
obtaining a certain
development approval of the local council and that in the event of the council
not granting
such approval by
31 May 1965 the contract
was to be at an end. By
31 May 1965 the council's approval had not been given and the purchaser
had
not
waived the condition. It
was held that the contract did not automatically
come to an end. Taylor, Menzies and Owen JJ. said
(1966)
116 CLR, at p 441 :
"Whilst the effect of a condition must in every case depend upon the
language in which it is expressed and a decision upon
the meaning of one
condition cannot determine the meaning of a different condition, the
authorities cited do show a disposition on
the part of the courts to treat
non-fulfilment of a condition such as that here under consideration as
rendering a contract voidable
rather than void in order to forestall a party
to a contract from gaining some advantage from his own conduct in securing,
or contributing
to, the non-fulfilment of a condition bringing the contract
to an end. Accordingly . . . we are prepared to treat non-fulfilment
of the
condition as rendering the contract voidable rather than void."
Barwick C.J. was of a similar opinion (1966) 116 CLR, at p 429 . The authority
principally relied on by the Court was Suttor v. Gundowda
Pty. Ltd. [1950] HCA 35; [1950] HCA 35; (1950) 81
CLR 418 , a case of condition subsequent. It was not suggested in either of
those cases that
it was necessary
to give
any notice to complete. The
non-fulfilment of the condition gave the party not in default a right to avoid
the contract,
but if that
party did not exercise the right the other party
might enforce the contract against him. In Suttor v. Gundowda
Pty. Ltd.
the
attempt
to cancel the contract was made too late, since the condition had been
fulfilled in the meantime (1950) 81
CLR, at p
442 . It appears
to have been
assumed that no notice to complete need be given before the right to avoid the
contract was
exercised.
In both cases
however a time for fulfilment of the
condition was expressly fixed by the contract. (at p545)
10. Suttor v. Gundowda Pty. Ltd. and Gange v. Sullivan are consistent with Aberfoyle Plantations Ltd. v. Cheng, and support the view that where a conditional contract fixes the date by which the condition is to be fulfilled the contract may be terminated if the condition has not been fulfilled when that date arrives, and that it is unnecessary to give any prior notice to the other party. The question is whether a similar conclusion should be reached when no time for fulfilment of the condition is fixed by the contract, and it accordingly must be performed within a reasonable time. There is little authority on the question, and it must be approached from the standpoint of principle. The condition with which we are concerned is not one which it was entirely in the power of the appellants to fulfil. Although they might use their best endeavours to find a buyer and complete a sale, it still remained necessary for them to find someone prepared to buy. Although, in fact, the appellants did not make reasonable efforts to satisfy the condition, it is impossible to say that they must have effected a sale within a reasonable time if they had made all reasonable endeavours to do so. It seems inappropriate that one party to a contract should be able to give a notice requiring the other to complete a sale, when that other party has not promised to do so (his promise only being to do all that was reasonable) and when it is not necessarily within his power to do so. The doctrines of equity enable a party to a contract to obtain specific performance notwithstanding his failure to carry out his obligations within a stipulated time, when that time is not of the essence of the contract. The party not in default has a corresponding power to limit a particular time within which the other contracting party is to perform his obligations. These principles have recently been discussed by this Court in Louinder v. Leis [1982] HCA 28; 149 C.L.R. 509. . They apply, in my opinion, only where the party to whom a notice may be given is under a contractual obligation to act. In the present case no doubt the appellants might have been given a notice requiring them to make reasonable efforts to sell, but they could not have been required to make a sale, for that was beyond their power. Moreover, a notice can only be given when the party to whom it is addressed is either in breach of contract, or guilty of unreasonable delay. A purchaser might have made all reasonable efforts but yet have been unable to complete a sale, and in that situation the vendor would not be able to give a notice to complete, and would, if the appellants' argument is correct, be bound indefinitely to a contract that might never result in a sale. For these reasons I consider that when the time has elapsed for performance of a condition which is not a promissory condition, but a condition precedent to the obligation to complete a contract of sale, either party, if not in default, can elect to treat the contract as at an end if the condition has not been fulfilled or waived, and that it is not necessary first to give a notice calling on the party in default to complete the contract or fulfil the condition. What I have said is, of course, subject to any sufficient indication of a contrary intention in the words of the contract itself. The conclusion that I have reached is supported by the judgment of Lord Keith in T. Boland and Co. Ltd. v. Dundas's Trustees (1975 S.L.T. (Notes). , with whose reasoning I respectfully agree. It accords also with the judgment of Cross J. (as he then was) in In re Longlands Farm (1968) 3 All ER 552 , a decision whose authority on this point is weakened by the fact that a notice to complete had in fact been given. A contrary view was taken in Hunt v. Wilson (1978) 2 NZLR 261 by Cooke J., who considered that a notice making time of the essence is necessary. Although in Aberfoyle Plantations Ltd. v. Cheng (1960) AC 115 an erroneous view may have been taken of the nature of the condition there considered, nevertheless, in my respectful opinion, it was correct to hold that the time fixed by the contract for performance of the condition was not to be extended by reference to equitable principles, and the same conclusion should be reached when the condition is to be performed within a reasonable time. (at p546)
11. In the present case the learned trial judge was plainly correct in holding that a reasonable time for the fulfilment of special condition 6 had expired by September 1978. In the view that I have formed, it was then open to the respondent to avoid the contract without first giving any notice limiting a reasonable time for completion. By instituting the proceedings, before the condition had been either fulfilled or waived, the respondent sufficiently evidenced its election to avoid the contract. (at p547)
12. I would dismiss the appeal. (at p547)
STEPHEN J. I would dismiss this appeal for the reasons appearing in the judgment of Brennan J., which I have had the advantage of reading. (at p547)
MASON J. By a contract dated 7 April 1978 the respondent agreed to sell and the appellants agreed to buy certain land at Cronulla near Sydney for the sum of $220,000 payable as to $22,000 by way of deposit on the signing of the contract and as to the balance on completion. The contract was in the Law Society and Real Estate Institute form (1972 copyright) with special conditions. It did not fix a time for completion. Special condition 6 provided: "This Contract is entered into subject to Purchasers completing a sale of their property No. 9 Korokan Road, Lilli Pilli." (at p547)
2. On 8 May 1978 the respondent's solicitors, who had furnished particulars of title on 10 April, informed the appellants' solicitors that the respondent was concerned at the delay because it wished to purchase another property. The appellants' solicitors replied stating that every endeavour was being made to sell the property at Lilli Pilli. On 15 May the respondent's solicitors spoke of terminating the contract and on 8 June they threatened to give a notice to complete, repeating their threat on 23 June. On 30 June a notice to complete was given. It has been treated as being ineffective. (at p547)
3. On 17 July, following further correspondence and conversations between the solicitors, the respondent served a notice to complete the contract on 8 August 1978. On 10 August it purported to terminate the contract, relying on non-compliance with the notice. On 29 September the respondent commenced proceedings in the Supreme Court for a declaration that the contract had been effectively terminated on or about 10 August, a declaration that the deposit had been forfeited and an order for removal of a caveat that had been lodged on behalf of the appellants. (at p547)
4. In February 1979 the appellants indicated that they were willing to complete the sale. Their change of attitude was due to the willingness of their bank to provide finance. Although at that time they had not succeeded in selling the house at Lilli Pilli, they indicated their willingness to waive special condition 6. The respondent continued to insist that it had validly terminated the contract. As it happened, the property at Lilli Pilli was subsequently sold, completion of the sale taking place on 13 June 1979. Before that sale was completed, on 21 March 1980, the appellants cross-claimed for specific performance of their contract with the respondent in the Supreme Court proceedings. (at p548)
5. From the evidence given in the proceedings it appears that the house at Lilli Pilli was placed on the market in March 1978. The male appellant sought the advice of a number of agents who told him that the price which he wanted, $189,000, was the very top of the market. Nevertheless the property was advertised for sale in April and May 1978 for $189,000. On 24 May the male appellant advertised the property at $179,000. Later in July and August he reduced the price to $169,000. This continued to be the advertised price until January 1979. No offers to purchase were received and few people fully inspected the property. Later in 1978 a formal evaluation was obtained and the house was then advertised and later sold at $155,000. (at p548)
6. At first instance Needham J. found that the male appellant was not a reliable witness. He further found that it was the male appellant who fixed the price and altered it from time to time. His Honour concluded that he did not act reasonably at all times and that it was unreasonable on his part not to reduce the price earlier than he had when no offers and few inspections arose, particularly when the respondent had expressed anxiety about lack of progress as early as May 1978. His Honour found that a reasonable time had expired by September 1978, that a notice to complete was unnecessary and that all the respondent needed to do after a reasonable time had expired was to avoid the contract. His Honour made a declaration that at the time of the commencement of the proceedings the contract was terminated and by consent ordered the return of the deposit to the appellants. (at p548)
7. An appeal to the Court of Appeal was dismissed. Glass J.A. (with whom Reynolds J.A. agreed) held that equity follows the law in giving effect to a time stipulation in a non-promissory condition (Aberfoyle Plantations Ltd. v. Cheng (1960) AC 115, at p 126 ) and that the respondent was entitled to treat the contract as at an end upon the expiration of a reasonable time from the making of the contract, special condition 6 not having been fulfilled within that time. Mahoney J.A. though that the special condition was a condition in the classic sense, non-fulfilment giving rise to an option to terminate. His Honour concluded that, even if the respondent did not have an option to terminate for non-fulfilment of the condition, it was entitled to succeed because the appellants failed to complete within a reasonable time. (at p549)
8. The appellants' case is directed at the Privy Council decision in
Aberfoyle. The appellants invite us not to follow Aberfoyle
or to distinguish
it. Accordingly, it is convenient to begin by ascertaining what the case
decided. By a conditional agreement made
on 8 November 1955 the appellant
agreed to sell a rubber estate of 1,336 acres. At the time the appellant had a
good title to 1,154
acres only and it was negotiating to renew its leases to
the remaining 182 acres, the seven leases to that area having previously
expired. Clause 4 of the agreement provided:
"The purchase is conditional on the vendor obtaining . . . a renewal of
the seven (7) leases . . . so as to be in a position
to transfer the same to
the purchaser and if . . . the vendor is unable to fulfil this condition
this agreement shall become null
and void and the vendor shall refund to the
purchaser the . . . deposits already made. . . ".
The agreement stipulated that completion was to take place on or before 30
April 1956, a date which was subsequently extended by
the purchaser to 31 May
1956. The condition was not fulfilled by 11 June 1956 when the purchaser
brought an action claiming the return
of the deposits paid. The Judicial
Committee held that the condition in cl. 4 had to be performed at latest by 30
April 1956 or by
the extended time granted by the purchaser and, accordingly,
the respondent was entitled to the return of his deposits. Until the
condition
was fulfilled there was no contract of sale to be completed, and by fixing a
date for completion the parties impliedly
agreed that the contract must have
become absolute through performance of the condition by that date at the
latest. (at p549)
9. Lord Jenkins stated the relevant principles (1960) AC, at pp 124-125 :
"(i) Where a conditional contract of sale fixes a date for the
completion of the sale, then the condition must be fulfilled
by that date;
(ii) where a conditional contract of sale fixes no date for completion of
the sale, then the condition must
be fulfilled within a reasonable time;
(iii) where a conditional contract of sale fixes (whether specifically or
by reference
to the date fixed for completion) the date by which the
condition is to be fulfilled, then the date so fixed must be strictly
adhered to, and the time allowed is not to be extended by reference to
equitable principles." (at p549)
10. Lord Jenkins (1960) AC, at p 126 went on to say ". . . that the reason for taking the date fixed for completion by a conditional contract of sale as the date by which the condition is to be fulfilled . . . " is ". . . that until the condition is fulfilled there is no contract of sale to be completed, and accordingly, that by fixing a date for completion the parties must by implication be regarded as having agreed that the contract must have become absolute through performance of the condition by that date at latest." According to his Lordship the same result ensued when the contract fixed a date for performance on the part of the purchaser of his part of the bargain by payment of the purchase money. (at p550)
11. One question provoked by Lord Jenkins' choice of language is whether he
was referring to a condition precedent to the formation
of a contract or a
condition precedent to the formation of a contract or a condition precedent to
the duty to perform obligations
imposed by a contract. The passage which I
have just quoted perhaps suggests that he was thinking of a conditional
contract in the
sense that there was a condition precedent to completion. So
does the passage where his Lordship, discussing the respondent's argument,
noted that it stressed that the vendor's obligation to sell and the
purchaser's obligation to buy were expressed to be subject to
the condition
(1960) AC, at p 128 . However, he then stated that it "was a condition
precedent on the fulfilment of which the formation
of a binding contract of
sale between the parties was made to depend". And, when discussing the
consequences of the appellant's argument,
he said (1960) AC, at p 130 :
"The purchaser would have been obliged to perform his part of the bargain
on or before April 30, 1956, by paying the balance
of the purchase-money
before there was any binding contract, and with no assurance that a
binding contract would ever emerge."
He concluded the discussion by stating:
"It is unnecessary to enlarge on the confusion which would thus have
resulted in the event of the agreement ultimately being
avoided for
non-fulfilment of the condition." (at p550)
12. The same tendency to hover between two different concepts is evident in
the judgment of Maugham J. in In re Sandwell Park Colliery
Co.; Field v. The
Company (1929) 1 Ch 277 , a decision on which Lord Jenkins relied heavily.
Maugham J. spoke of the condition there
as one "upon which the validity of the
contract as one sale depends" (1929) 1 Ch, at p 282 , saying "the very
existence of the mutual
obligations is dependent on the performance of the
condition", and later described it as "a condition precedent to the validity
of
a contract for sale of land" (1929) 1 Ch, at p 283 . (at p550)
13. In this situation the area in which Aberfoyle stands as an authority should be closely circumscribed. I am not disposed to regard it as having authority beyond its own facts or as expressing any general principle applying to conditions other than non-promissory conditions which are precedent to the formation of a contract. It has been pointed out that judges have displayed much ingenuity in distinguishing Aberfoyle. (at p551)
14. The decision of this Court in Maynard v. Goode [1926] HCA 4; (1926) 37 CLR 529 and that of the Court of Appeal in Property and Bloodstock Ltd. v. Emerton (1968) Ch 94 are illustrations of a different approach. In Maynard it was held that the term "providing that the transfer of purchaser's block goes through in reasonable time" in a contract for the sale of a block of land was a condition subsequent, not a condition precedent. In Property and Bloodstock the contract contained a condition which made the sale subject to the vendor obtaining the consent of the landlord to the assignment of the lease to the purchaser, the residue of the lease being the subject of the sale. The Court decided that the landlord's consent to the assignment of the lease was no more than a mere matter of title, the contract being an unconditional contract of sale. Danckwerts L.J. expressed doubt as to the correctness of the Privy Council's characterization of the condition in Aberfoyle (1968) Ch, at p 116 . (at p551)
15. This divergence in approach calls for some discussion of the nature of conditions generally and of the characteristics of special condition 6 in particular. There is an obvious difference between the condition which is precedent to the formation or existence of a contract and the condition which is precedent to the obligation of a party to perform his part of the contract and is subsequent in the sense that it entitles the party to terminate the contract on non-fulfilment. In the first category the transaction creates no rights enforceable by the parties unless and until the condition is fulfilled. In the second category there is a binding contract which creates rights capable of enforcement, though the obligation of a party, or perhaps of both parties, to perform depends on fulfilment of the condition and non-fulfilment entitles him to terminate. (at p551)
16. Conditions precedent within the first category may produce different consequences. In most cases, but perhaps not in all, a party may be able to withdraw from the transaction before fulfilment of the condition. But in each class of case, the transaction creates no enforceable rights in respect of the subject matter of the transaction unless the condition is fulfilled because, until the occurrence of that event, there can be no binding contract. There is also a problem in classifying a transaction which imposes an obligation on a party not to do anything which will prevent fulfilment of the condition. Even if it is to be placed in the first category, that consisting of conditional contracts - and I have some difficulty in placing it there - it yields no enforceable rights with respect to the subject matter of the transaction unless and until the contract is fulfilled, though the obligation not to prevent fulfilment of the condition will be enforceable in the event of its breach. (at p552)
17. Generally speaking the court will tend to favour that construction which leads to the conclusion that a particular stipulation is a condition precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation or existence of a contract. In most cases it is artificial to say, in the face of the details settled upon by the parties, that there is no binding contract unless the event in question happens. Instead, it is appropriate in conformity with the mutual intention of the parties to say that there is a binding contract which makes the stipulated event a condition precedent to the duty of one party, or perhaps of both parties, to perform. Furthermore, it gives the courts greater scope in determining and adjusting the rights of the parties. For these reasons the condition will not be construed as a condition precedent to the formation of a contract unless the contract read as a whole plainly compels this conclusion. (at p552)
18. In the present case it is the language of special condition 6 alone which supports this result. By relating the condition to entry into the contract the clause seems to suggest that the formation or existence of the contract itself is dependent upon completion of the sale of the Lilli Pilli property. But the condition is capable of being read as a provision which conditions the performance of the obligations of one or both parties on fulfilment of the condition and the tradition in this Court is to so construe provisions of this kind - see Maynard [1926] HCA 4; (1926) 37 CLR 529 ; Suttor v. Gundowda Pty. Ltd. [1950] HCA 35; [1950] HCA 35; (1950) 81 CLR 418, at p 443 ; Brien v. Dwyer [1978] HCA 50; (1978) 141 CLR 378, at pp 393, 397-398 . Moreover, it is clear enough that the condition was inserted for the protection of the purchasers, to guard against the possibility that they would lack adequate finance. It was certainly not inserted for the protection of the vendor. Consequently, it is a condition which may possibly be capable of waiver by the purchasers, though this is not a point which needs to be decided. (at p552)
19. In the Court of Appeal, Mahoney J.A. thought that special condition 6 was not devoid of a promissory element. It relates to an event the occurrence of which, though not probably in the control of the purchasers, is closely affected by their actions and efforts. It would be absurd to suggest that the parties contemplated that the purchasers could refrain from making any effort to sell. That would be to give the purchasers what in substance amounted to an option to withdraw. I am therefore inclined to read the clause as imposing an implied obligation on the purchasers to make all reasonable efforts to sell the Lilli Pilli property. (at p553)
20. The conclusion to be drawn then is that the clause expresses a condition which is precedent to the appellants' duty to perform the contract, non-fulfilment of which entitles them to terminate the contract, rather than as a condition precedent to the formation of the contract. Instead of saying that the condition contains a promissory element I should prefer to say that the promise is the subject of an implied term which is associated with the condition, though perhaps not forming part of it. (at p553)
21. It seems that in the courts below the parties were united in the view that the vendor, as well as the purchasers, could terminate for non-fulfilment of the condition. On the other hand, as I have said, the clause was inserted for the protection of the appellants and it is probably unnecessary to concede to the respondent for its protection an equivalent right to terminate for non-fulfilment of the condition. It seems to be sufficiently protected by relying on its rights to insist on completion of the contract within a reasonable time and by taking such action as it may in that event. Even so, the fact that the clause draws no distinction between the parties and is not expressed to condition only the purchasers' obligation to complete, together with their implied obligation to make all reasonable efforts to sell the Lilli Pilli property, provide strong ground for thinking that the respondent as well as the appellants had a right to terminate on non-fulfilment of the condition. This does not necessarily deny a right in the appellants to waive the benefit of the clause, the respondent's right of termination for breach, like the appellants', subsisting so long as there is no waiver by the appellant. (at p553)
22. The provision is not one which on non-fulfilment works a termination of the contract of its own force without notice. If the clause were a self-executing provision its operation might cause very great confusion. It is preferable to view it as a provision which entitles the party to terminate by notice in the event of non-fulfilment, so that it has an operation similar to that of the clause discussed in Gundowda (1950) 81 CLR, at pp 440-442 . The consequence is that, if on non-fulfilment neither party exercises the right to terminate, the contract continues on foot. (at p554)
23. As the contract does not fix a time for completion it would accord with general principle to say that completion must take place within a reasonable time. In this case what is a reasonable time for completion needs to be measured with special condition 6 in mind. The clause does not specify a time within which the Lilli Pilli property is to be sold. Accordingly, it contemplates that there should be such a sale within a reasonable time. But it seems obvious that the parties envisaged that in the ordinary course of events the sale of the Lilli Pilli property would be completed before the appellants could be called upon to complete the purchase of the subject property. The mutual intention was that the appellants could only be compelled to complete if they had received the proceeds of sale of the Lilli Pilli property. The consequence is that a reasonable time for completion must necessarily be somewhat longer than the reasonable time allowed for the purpose of fulfilment of special condition 6. (at p554)
24. Was time of the essence in relation to that provision? The distinction between essential and non-essential terms is one which has been traditionally made for the purpose of determining whether breach of a term justifies rescission. It is a distinction which had particular importance for the exercise of the equitable jurisdiction to relieve against the consequence of strict adherence to time stipulations in contracts. Equity would relieve against rescission based on mere breach of a non-essential term not amounting to repudiation and would grant specific performance. Would equity likewise relieve against termination of a contract for non-fulfilment of a contractual condition? The answer must be "Yes", when the termination is based on breach of a non-essential term which does not amount to a repudiation of the contract. (at p554)
25. The expression of a provision in the form of a condition precedent endows it with the character of essentiality. However, when the condition looks to the happening of an event within a reasonable time, it leaves open the question whether this character of essentiality attaches to the time within which the condition is to be fulfilled. Provisions requiring something to be done within a reasonable time are not considered to be essential unless expressly or impliedly made so. There is a natural reluctance on the part of courts to classify a provision which looks to the happening of an event within a reasonable time as one which makes time of the essence, more particularly when that time is implied and is not expressed. The reason is of course that it is undesirable that the rights of the parties should rest definitively and conclusively on the expiration of a reasonable time, a time notoriously difficult to predict. One object of the development of the requirement that a notice should be given fixing a reasonable time for performance as an essential preliminary to rescission is the perceived need to promote greater certainty and a better understanding by parties of their rights and obligations. There is no very strong ground for saying that the reasonable time contemplated by special condition 6 was of the essence. The clause itself contains no reference to time. This is not surprising because the time needed to complete the sale of real estate is particularly difficult to estimate. And there is nothing in the structure of the contract or in the relationship of the clause to the ultimate obligation to complete the purchase within a reasonable time, this time itself not being of the essence, to compel a different conclusion. (at p555)
26. In many situations the giving of a notice relating to the non-fulfilment of a condition would serve little or no purpose, as, for example, when the happening of the event stands quite outside the control of the party to whom the notice is given. Aberfoyle itself was such a case. That is not so here. Although the happening of the event calls for the concurrence and co-operation of a buyer of the Lilli Pilli property, the willingness to sell and the efforts of the appellants were important contributing factors to the completion of the sale. (at p555)
27. For this and other reasons earlier discussed Aberfoyle does not govern this case. In saying this I should not wish it to be thought that I am generally in favour of construing time stipulations in contractual conditions as non-essential. Far from it. Quite apart from Aberfoyle (1960) AC 115 itself, Gange v. Sullivan [1966] HCA 55; (1966) 116 CLR 418 and In re Longlands Farm (1968) 3 A11 ER 552 show us that conditions which stipulate the date by which an event is to conclude will commonly be regarded as making essential fulfilment by that date. (at p555)
28. On the view which I take of this contract the respondent could not require the appellants to complete until a reasonable time had elapsed within which to complete the sale of the Lilli Pilli property. The primary judge found that a reasonable time had expired by September 1978, without making a specific finding on the question whether a reasonable time had elapsed by 17 July, when the second notice to complete was given requiring completion on 8 August 1978. It is, I think, implicit in his Honour's findings that he rejected the respondent's case that a reasonable time had elapsed by 17 July, a rejection with which I agree. Mahoney J.A. seems to have been in error in stating that the parties accepted that a reasonable time had so elapsed. But even if that were so the giving of a notice in relation to special condition 6 may well have been an essential preliminary for insistence on completion. (at p556)
29. In the result my conclusion is that the respondent did not validly rescind the contract by its notice given on 10 August 1978 and I would therefore allow the appeal. (at p556)
WILSON J. On 7 April 1978 the appellants contracted to purchase land from the respondent for the sum of $220,000. The contract did not name a date for completion. It is therefore appropriate to imply a term that the sale was to be completed within a reasonable time, having regard to the circumstances of the case as they would have appeared to th e parties at the date of contract. The dispute between the parties centres upon the effect to be given to a special condition contained in the contract, reading as follows: "This Contract is entered into subject to Purchasers completing a sale of their property No. 9 Korokan Road, Lilli Pilli." No date was specified in the contract for the fulfilment of this condition, and it is common ground that the time available for its fulfilment was limited to a reasonable time. (at p556)
2. It is said that some importance attaches to the proper characterization of the special condition, as to whether it is a condition precedent or a condition subsequent, and that the applicability of the principle established by the Judicial Committee in Aberfoyle Plantations Ltd. v. Cheng (1960) AC 115 may depend upon the answer. (at p556)
3. In Hunt v. Wilson (1978) 2 NZLR 261, at p 267 , Cooke J. said:
"I venture to think that the ambiguous labels precedent and subsequent,
when applied to conditions, are seldom of real help
in solving issues in
this branch of contract law. Certainly they can be positively misleading
unles the meaning of what is being
said is made specific by explaining to
what the condition in question is seen as precedent or subsequent."
I entirely agree. If it matters at all, the special condition in this case may
be described with accuracy as either a condition subsequent
to the formation
of the contract or as a condition precedent to an obligation in either party
to proceed to completion. The obligation
to complete is contingent on the
fulfilment of the condition, but in the meantime there is a conditional
contract in existence from
which neither party is at liberty to withdraw at
will. Interim obligations were undertaken by both parties. The vendor had to
make
good its title to sell, and the purchasers were obliged to pay the
deposit and make all reasonable efforts to bring about a sale
of the Lilli
Pilli property. (at p557)
4. Speaking for myself, I have difficulty in assigning the decision in
Aberfoyle to the very limited category of cases dealing with
conditions
precedent to the formation of a contract. It seems to me that when Lord
Jenkins (1960) AC, at pp 128, 130 spoke of a condition
precedent, he was
speaking of the condition in that case as precedent to the coming into
existence of a binding contract of sale.
As Sachs L.J. remarked in Property
and Bloodstock Ltd. v. Emerton (1968) Ch 94, at p 121 , after referring to
Lord Jenkins' words,
"The distinction, of course, is there drawn between a contract and a
contract of sale, and that particular distinction is one
which derives from
the long-used phraseology, almost the traditional phraseology, such as that
to be found in Anson on Contract,
22nd ed. (1964), p. 111, and in Chalmers'
Sale of Goods 14th ed. (1963), p. 243." (at p557)
5. Again, in In re Sandwell Park Colliery Co.; Field v. The Company (1929) 1
Ch 277, at p 282 , Maugham J. refers to a "condition
upon which the validity
of the contract as one sale depends" (sic "one of sale") and to a "condition
precedent to the validity of
a contract for sale of land" (my emphasis) (1929)
1 Ch, at p 283 . (at p557)
6. In my opinion, therefore, the general character of the conditions in
Sandwell Park and Aberfoyle are indistinguishable from the
condition in the
present case. Nevertheless, there is some difficulty in applying the principle
of those cases to an open contract,
namely, one where there is no specific
date fixed either for the fulfilment of the condition or the completion of the
contract. In
both cases, the contract specified the date for its completion.
In each case, however, the statement of principle extends to cases
where no
date is fixed. In Sandwell Park (1929) 1 Ch, at p 282 , Maugham J. emphasizes
the demand for certainty in relation to conditional
contracts, saying
"Equity has, I think, never applied its liberal views as to time to such
a condition. If a date is mentioned, the condition
must be exactly
complied with. If a date is not mentioned, the condition must be fulfilled
within a reasonable time . . .
".
But surely the very implication of a reasonable time denies certainty, and one
of the functions which a notice to complete issued
after the lapse of a
reasonable time may serve is to substitute the certainty of a specific date
for the uncertainty of a reasonable
time. It is true that in In re Longlands
Farm (1968) 3 A11 ER 552 , Cross J. characterized the contract in that case as
a contract
conditional on one party obtaining planning permission, and held
that the condition was to be fulfilled within a reasonable time.
He held
further that the period must be determined as at the date of the contract and
that on the expiry of the period the other
party was entitled to treat the
contract as at an end. However, that decision, while plainly in accord with
the merits of the case,
may be open to some question: see per Cooke J. in Hunt
(1978) 2 NZLR, at p 270 . (at p558)
7. Furthermore, I am not satisfied that Aberfoyle provides authority for the
proposition that on the expiration of a reasonable
time allowed by implication
for the fulfilment of a condition a party may thereupon without more declare
the contract to be void.
As I have said, their Lordships were dealing with a
contract which specified a date. It was a date fixing the time for payment of
the purchase price by the purchaser, and the real issue between the parties
was as to the relationship which the time for fulfilment
of the condition bore
to that date. Nevertheless, after mentioning the overriding importance of the
intention of the parties as expressed
in, or to be implied from, the language
they have used, their Lordships continued (1960) AC, at pp 124-125 :
"But, subject to this overriding consideration, their Lordships would
adopt, as warranted by authority and manifestly reasonable
in themselves,
the following general principles: (i) Where a conditional contract of sale
fixes a date for the completion of the
sale, then the condition must be
fulfilled by that date; (ii) where a conditional contract of sale fixes no
date for completion of
the sale, then the condition must be fulfilled within
a reasonable time; (iii) where a conditional contract of sale fixes (whether
specifically or by reference to the date fixed for completion) the date by
which the condition is to be fulfilled, then the date
so fixed must be
strictly adhered to, and the time allowed is not to be extended by reference
to equitable principles."
The authorities to which their Lordships then refer are Smith v. Butler (1900)
1 QB 694 and Sandwell Park (1929) 1 Ch 277 . The former
case was one in which
the contract specified a date for completion but there was no time specified
for fulfilment of the condition.
The Court of Appeal held that the completion
date provided the limit of time for the condition to be fulfilled. The case
therefore
answered to the first of the general principles adumbrated in
Aberfoyle. In Sandwell Park, Maugham J. was also dealing with a conditional
contract which fixed a specific date for completion. (at p559)
8. It is the second of the three principles stated in Aberfoyle which
purports to cover the present case, but it will be noted that
it takes us no
further than the conclusion that the condition must be fulfilled within a
reasonable time. The statement of principle
provides no guidance as to the
next step, which is how the uncertainty inherent in the implication of a
reasonable time which is
unspecified as to any particular date is to be
resolved in the interests of fairness to both parties. It is that function
that a
notice would serve. I find some confirmation for my view that Aberfoyle
does not decide the present case in the discussion of the
decision by Cooke J.
in Hunt (1978) 2 NZLR, at p 271 , where after citing Aberfoyle (1960) AC, at p
128 his Honour concludes:
"Although their Lordships did not go as far as positively deciding the
point, their observations certainly tend towards the
view that, if no time
is fixed for completion and a condition is to be satisfied within a
reasonable time, the equitable requirements
as to notice apply." (at p559)
9. It is important to recognize and maintain the distinction between a
contract which is subject to a condition which requires for
its fulfilment a
decision from a person other than a party to the contract, and an
unconditional contract. It is in the context of
the latter that we have become
accustomed to the operation of equitable principles which afford relief
against the strict application
of time stipulations which are not of the
essence, requiring in that regard the service of a notice to perform or to
complete as
the case may be before rescission or specific performance will be
enforced. In such cases there is necessarily one party who is in
breach of an
obligation under a contract which the innocent party rightly expects to
proceed to completion. If the contract is not
carried through to completion,
then the party in default will lose the deposit and, depending on the
circumstances, may or may not
be liable in damages. (at p559)
10. There can be no such firm expectation in a conditional contract. Neither party can be sure of the contract proceeding to completion, for it does not lie in the will of either party to ensure the fulfilment of the condition. This case is an instance of a conditional contract where there is to be implied a collateral promise by the appellants to make reasonable endeavour to sell the Lilli Pilli property. A breach of that implied term may entitle the respondent to an action for damages. Nevertheless, compliance with the term cannot guarantee that a buyer at a satisfactory price will be found. The completion of the contract is dependent, in the absence of a waiver, on the prior fulfilment of a condition as to which it does not lie fully within the capacity of the appellants to effect. The agreement between the parties is subject to the prior sale of the Lilli Pilli property. If on the expiration of a reasonable time that property has not been sold, then either party may initiate the steps which are necessary to the termination of the agreement: cf. Suttor v. Gundowda Pty. Ltd. [1950] HCA 35; (1950) 81 CLR 418, at p 441 . There being no default, the deposit will be refunded. (at p560)
11. In my opinion, it is to be implied from the agreement that should the Lilli Pilli property not be sold within a reasonable time, then the fate of the contract will be resolved according to the action which may be taken by either party. The purchasers may elect to waive the condition, it being one wholly for their benefit, and proceed to completion, thereby holding the vendor to its contract. Alternatively, provided that they have acted reasonably in their attempts to sell the property, they may rely on the non-fulfilment of the condition to bring the contract to an end, and recover their deposit. On the other hand, the vendor may force the issue simply by serving a notice to complete. I do not think it appropriate to contemplate a notice to the purchasers requiring them to fulfil the condition, because the time agreed for that will have expired, and in any event it does not lie within the capacity of the purchasers to fulfil it. The effect of a notice to complete is to give the purchasers, should they wish to waive the condition, the opportunity to finalize the transaction; alternatively, it serves to crystallize in the minds of both parties a common date on which the contract will come to an end for non-fulfilment of the condition. In the latter case, non-compliance with the notice to complete will not fix the purchasers with any default such as would deprive them of the right to the return of their deposit, although as I have said, a failure to make reasonable efforts to sell the property may expose them to an action for damages. (at p560)
12. I believe that this construction of the relationship between the parties
is wholly consistent with the decision of this Court
in Maynard v. Goode
[1926] HCA 4; (1926) 37 CLR 529 . In that case a contract for the sale of land was subject
to a condition "that
the transfer
of purchaser's block
goes through in
reasonable time". The vendor argued that the condition was a true condition
precedent,
with
the result that the vendor
incurred no obligation to carry out
the contract until the condition had been performed. It was also
argued
that
time was of the
essence of the contract, or alternatively that if that were
not so then in any event the transfer of
the purchaser's
block had not
gone
through in reasonable time. The Court rejected each of these submissions. Knox
C.J. said (1926)
37 CLR, at p 536
:
"With regard to the stipulation as to the transfer going through within
a reasonable time, I think it is clear on the construction
of the contract
that this was not a condition precedent. It provides that the performance of
the contract shall be subject to the
happening of an event which is to
happen, if at all, at a future time which cannot be precisely specified.
Unless that event happens
neither party is to be compelled to perform the
contract in its entirety, the promise of each being subject to or defeasible
upon
the condition expressed. . . .
With regard to the second objection it is enough to say that, in the
absence of any stipulation that time shall be of the essence
of the
contract, there is nothing in the circumstances to justify the conclusion
that the parties intended that time should be essential.
The third objection, in my opinion, fails because in all the
circumstances of the case the transfer of Goode's block to
Angel did go
through within a reasonable time."
See also per Isaacs J. (1926) 37 CLR, at pp 539-540 , and Rich J. (1926) 37
CLR, at p 544 . Higgins J. (1926) 37 CLR, at p 542 said,
with reference to the
right to avoid the contract for non-fulfilment of the condition:
". . . I strongly think that a right to put an end to the contract or to
refuse to perform it would not arise thereunder automatically
without some
warning notice from the vendor, fixing a reasonable limit of time for
completion." (at p561)
13. There are therefore two questions to be determined, upon the answers to
which the efficacy of the notice to complete served
17 July 1978 and the
subsequent termination of the contract on 10 August will rest. The first is
the period of time, that the parties
would have agreed in March or early April
1978 was a reasonable time to allow for the Lilli Pilli property to be sold.
This is a
matter of inference from all the circumstances. The second question
is whether the notice to complete allowed a reasonable time for
completion.
(at p561)
14. Although contracts were not exchanged until 7 April 1978, the deposit of $22,000 was paid some time before that, and the Lilli Pilli property was put on the market in March. The nature of the condition, namely, one which operates wholly in favour of the purchaser, suggests that a reasonable time will be just that and no more. In other words, fairness to the vendor requires that it be determined rationally but without undue latitude. The vendor remains at risk that, in the event of the condition being unfulfilled, the sale will not proceed and it will have to return the deposit. It will then have suffered for the period in question the loss of its freedom to deal with its property without receiving any adequate remuneration for such loss. It would be unjust to require its hands to be tied for a period longer than would have been anticipated when the contract was made to be reasonably necessary to allow the condition to be fulfilled: Sandwell Park (1929) 1 Ch, at p 282 ; United Scientific Holdings Ltd. v. Burnley Borough Council (1978) AC 904, at p 929 . The appellants argue that the difficulties of effecting a sale of a waterfront property during the winter months would have been present to the minds of the parties. I am unable to accept the contention, since it would require the vendor to have bound itself to a sale which could not be expected to be completed until well into the following summer which was then many months away. (at p562)
15. The finding of the learned trial judge was expressed in the following sentence in his reasons: "The defendants do not assert that a reasonable time had not expired by September 1978, and I am of the opinion that the proper conclusion on the evidence is that a reasonable time had by then expired." This conclusion supplied the ground for a finding in favour of the plaintiff vendor, and his Honour referred to the fact that the plaintiff had taken action to avoid the contract by its notice of termination dated 10 August 1978 and by commencing the proceedings for a declaration on 29 September 1978. His Honour took the view that a notice to complete was unnecessary, so that he did not have to direct his mind specifically to the question whether a reasonable time had elapsed by the 17 July, the date when the notice to complete was served. I do not think that the finding to which I have referred supplies any implication that his Honour rejected the vendor's claim that a reasonable time had expired by the middle of July; it was sufficient to rely on what was common ground between the parties, that, whether or not a reasonable time had expired by July, it had certainly expired by September. (at p562)
16. In my opinion, a reasonable time for the sale of the Lilli Pilli property had expired by the middle of July. It is immaterial to seek for an explanation for the non-fulfilment of the condition, but no doubt it lies in the finding of the learned trial judge that the appellants did not make reasonable efforts to effect a sale. Putting oneself in the shoes of the parties as they negotiated their agreement in March, it seems to me that a period of four months would have been the very most that the appellants could have persuaded the vendor to accept. (at p563)
17. The final question is whether the period of twenty-two days allowed in the notice to complete was a reasonable time. In my opinion, it was. I have in mind the function of such a notice in the context of a conditional contract where the time for the fulfilment of the condition has expired. I also have regard to the fact that from May 1978 the vendor was pressing the appellants to complete, and made no secret of its wish for an early settlement. The circumstances of the particular case will always be most relevant: cf. Stickney v. Keeble (1915) AC 386, at pp 419, 426 . (at p563)
18. For these reasons, I conclude that the decisions, though not the reasoning, of the learned trial judge and the Court of Appeal were correct and ought to be affirmed. (at p563)
19. I would dismiss the appeal. (at p563)
BRENNAN J. Mr. and Mrs. Perri, the appellants, owned a property at Lilli Pilli. They wished to sell that and to buy another at 4 Coolangatta Avenue, Cronulla. The Cronulla property was owned by Coolangatta Investments Pty. Ltd., the respondent. On 7 April 1978 Mr. and Mrs. Perri, the purchasers, and Coolangatta Investments Pty. Ltd., the vendor, exchanged contracts for the purchase and sale of the Cronulla property for the price of $220,000. They used the printed form of contract approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales to which they added an annexure containing terms designated "Special Conditions". Special Condition 6 (hereafter "the stipulation") reads as follows: "This Contract is entered into subject to Purchasers completing a sale of their property No. 9 Korokan Road, Lilli Pilli." (at p563)
2. The purchasers did not enter into a contract to sell their Lilli Pilli
property until 9 March 1979. That sale was not completed
until 13 June 1979.
In the proceedings in the Supreme Court of New South Wales out of which this
appeal arose, Needham J. found that
a reasonable time for the completion of a
sale of the Lilli Pilli property had expired by September 1978. His Honour
found that the
failure by Mr. and Mrs. Perri to complete the sale of their
Lilli Pilli property within a reasonable time was caused by their listing
of
the property for sale at an unreasonably high price and by their continued
seeking of an unreasonably high price until January
1979. Coolangatta
Investments Pty. Ltd. was pressing for completion of the sale of the Cronulla
property from May 1978, and ultimately
served a notice dated 17 July 1978
requiring the purchasers to complete the contract on or before 8 August 1978.
When the purchasers,
relying on the stipulation, declined to complete the
contract in accordance with the notice, the vendor served a notice of
rescission
dated 10 August 1978 the material part of which read:
"NOW TAKE NOTICE that the Vendor pursuant to every power available to the
Vendor hereby rescinds and/or terminates the Contract
and relies upon: -
(a) the Purchaser's failure to complete in accordance with the contract
and the said Notice to Complete, and
(b) the expiration of a reasonable time under Special Condition 6 of the
Contract. . . ". (at p564)
3. On 29 September 1978, the vendor filed a summons seeking a declaration
that on or about 10 August 1978 it had effectively terminated
the contract for
the sale of the Cronulla property. After the vendor had commenced proceedings,
but before they had sold the Lilli
Pilli property, the purchasers approached
their bank and made arrangements for finance to complete the purchase of the
Cronulla property.
On 27 February 1979, the purchasers' solicitors,
purportedly waiving the benefit of the stipulation, wrote to the vendor's
solicitors
seeking completion of the sale "at 3.00 p.m. on the 15th March next
or at such other time as shall mutually be agreeable". The vendor's
solicitors
replied that the vendor had terminated the contract by the notice of
rescission of 10 August 1978. On 21 March 1980, the
purchasers cross-claimed
for specific performance of the contract. Needham J. found that the contract
had terminated before the vendor
had commenced proceedings on 29 September
1978 and made a declaration accordingly. An order was made that the deposit of
$22,000
be repaid by the vendor to the purchasers. The cross-claim failed. The
purchasers' appeal to the Court of Appeal was dismissed. (at
p564)
4. The purchasers submitted in this Court that the contract was not avoided before they waived the benefit of the stipulation and that, upon waiving the stipulation, they were entitled to insist upon performance of the contract. The case turns upon the effect of the stipulation. (at p564)
5. The stipulation conditions the obligations of either party to proceed with
the sale of the Cronulla property; it specifies the
event - namely, the
completion of the sale of the Lilli Pilli property - upon the occurrence of
which the obligation to proceed with
the sale of the Cronulla property is
contingent. The stipulation does not affect the purchasers' obligation to pay
the deposit on
the signing of the agreement (cl. 1); perhaps it does not
affect the purchasers' obligation to tender to the vendor an appropriate
instrument of transfer for execution by it (cl. 4). The stipulation is at once
a condition precedent to the obligations of the parties
to complete the
contract and a condition subsequent to the whole contract so that the
non-occurrence of the specified event would
entitle the vendor to avoid it.
The clause which was considered in Maynard v. Goode [1926] HCA 4; (1926) 37 CLR 529 was of
the same
kind. In that
case a contract for the sale of a grazing property
contained a proviso "that the
transfer of purchaser's block goes
through in
reasonable
time". Isaacs J., referring to that proviso as the "second
stipulation",
said of it (1926) 37 CLR, at p 540
:
"But it may be a condition precedent to the performance of a particular
term of the contract, which is of common occurrence.
. . . In one sense the
second stipulation is of that nature, because there was no obligation on
Crosby to transfer unless Goode first
transferred his holding in reasonable
time. But in another sense it is . . . a condition subsequent in relation,
not to a particular
term, but to the whole contract, as a binding
obligation, that is, as a defeasance, because . . . failure of the second
(stipulation)
would have entitled the vendor, to retire from the transaction
altogether."
In the present case, the vendor asserts that it did retire from the
transaction, and it is necessary first to consider whether there
was a
non-fulfilment of the stipulation which entitled it to do so. (at p565)
6. The purpose of the stipulation is to ensure that the purchasers should have the proceeds of the sale of their Lilli Pilli property before their obligation to pay the balance of the purchase price for the Cronulla property becomes absolute. The substance of the stipulation is a condition for the benefit of the purchasers and they may waive it if they choose. But the limit of the time within which the stipulation is to be fulfilled ensures for the benefit of the vendor as well as for the benefit of the purchasers, "the vendor being interested to know for how long his liability was to remain unresolved" (per Windeyer J. in Gange v. Sullivan [1966] HCA 55; (1966) 116 CLR 418, at p 443 ). When vendor and purchaser are each under a contingent obligation to complete a contract of sale, the fulfilment of the contingency or the entitlement to avoid the obligation is of equal interest to both parties. (at p565)
7. Though the stipulation specifies the event upon the occurrence of which the obligations to complete cease to be contingent, the stipulation contains no promise that the event will occur. Until the event occurs or the purchasers waive the benefit of the stipulation (Gange v. Sullivan (1966) 116 CLR, at pp 430, 443 ) neither party is entitled to a decree of specific performance of their respective obligations to complete the sale (Brown v. Heffer [1967] HCA 40; (1967) 116 CLR 344, at p 350 ) and the purchasers have no equitable interest in the property which is the subject of the contract (McWilliam v. McWILLIAMS wINES pTY. lTD. [1964] HCA 6; [1964] HCA 6; (1964) 114 CLR 656 ). (at p566)
8. Assuming that the contract remained on foot until 27 February 1979, when the purchasers purportedly waived the benefit of the stipulation, the obligations to complete the sale of the Cronulla property did not become unconditional before that date. In the absence of waiver of the stipulation, the obligations to complete remained contingent upon the completion of the sale of the Lilli Pilli property. Of course, the purchasers had the carriage of the sale of their Lilli Pilli property, and the stipulation imported an obligation upon them to do all that was reasonable on their part in order that a sale of that property might be completed (Butts v. O'Dwyer [1952] HCA 74; (1952) 87 CLR 267, at p 280 ; McWilliam v. McWilliams Wines Pty. Ltd. (1964) 114 CLR, at p 661 ). But that was the extent of their promissory obligation under the stipulation. Their obligation was not to complete a sale of their Lilli Pilli property but to do all that was reasonably to be done to that end. (at p566)
9. In the confusion of the promissory and contingent effects of the stipulation lie the seeds of difficulty in this case. The risk of confusion is great, because completion of a sale is the usual consequence of taking reasonable steps to that end. But there is a real distinction between the completion of a sale and the steps taken to achieve it, and the observance of the distinction goes far towards avoiding the difficulty. This is not a case where the purchasers promise that a condition precedent to the obligation to complete will be fulfilled. Where such a promise is made, whether by vendor or purchaser, specific performance may be decreed against the promisor without waiting for fulfilment of the condition: cf. Kennedy v. Vercoe [1960] HCA 64; [1960] HCA 64; (1960) 105 CLR 521 . But where the occurrence of an event upon which the obligations to complete are contingent is not promised, the mere non-occurrence of the event is no breach of contract, and the court will not decree completion of the contract absolutely. In such a case, a decree must be limited to the performance of any promise affecting the occurrence of the contingency, and further performance decreed only subject to the contingency: see Brown v. Heffer [1967] HCA 40; (1967) 116 CLR 344 . (at p566)
10. If the event does not occur because of the default of a party, however,
the innocent party ordinarily has an option of avoiding
the contract (Suttor
v. Gundowda Pty. Ltd. [1950] HCA 35; (1950) 81 CLR 418, at p 441 ). In Gange v. Sullivan
(1966) 116 CLR, at
p 441 , Taylor,
Menzies and Owen JJ. stated the general
principle:
"Whilst the effect of a condition must in every case depend upon the
language in which it is expressed and a decision upon the
meaning of one
condition cannot determine the meaning of a different condition, the
authorities cited do show a disposition on the
part of courts to treat
non-fulfilment of a condition such as that here under consideration as
rendering a contract voidable rather
than void in order to forestall a party
to a contract from gaining some advantage from his own conduct in securing,
or contributing
to, the non-fulfilment of a condition bringing the contract
to an end." (at p567)
11. In the present case, the event specified in the stipulation did not occur
until June 1979, some fourteen months after the vendor
and purchasers had
exchanged contracts. The vendor had complained of the failure on the part of
the purchasers to do what was reasonable
to effect a sale of their Lilli Pilli
property and, having demanded completion of the contract, the vendor gave
notice of rescission
of the contract on 10 August and issued a summons on 29
September 1978. Though the vendor was an innocent party and its desire to
avoid the contract was manifest on or before 29 September 1978, the purchasers
submitted that the vendor was not entitled to rescind
and did not do so. (at
p567)
12. It was submitted that Needham J. was wrong to find that a reasonable time for the completion of a sale of the Lilli Pilli property had expired before September 1978. It was conceded that the stipulation required completion of the Lilli Pilli sale within a reasonable time from the making of the subject contract, and in my view that concession was rightly made. The interests of both parties in resolving their respective contingent obligations under the contract require that a limit be placed upon the time during which the contingency should occur. As there is no reason why a different implication as to time should be made in respect of a contingent condition from the implication made in respect of a promissory condition, a reasonable time is implied in the absence of indications to the contrary: see Reid v. Moreland Timber Co. Pty. Ltd. [1946] HCA 48; (1946) 73 CLR 1, at p 13 . This conclusion accords with the opinion of the Judicial Committee in Aberfoyle Plantations Ltd. v. Cheng (1960) AC 115 as to the time for fulfilment of a condition when the contract fixes no time for completion of a sale. In such a case, said Lord Jenkins (1960) AC, at p 124 , "the condition must be fulfilled within a reasonable time". (at p567)
13. What is a reasonable time is a question of fact and depends upon the
circumstances. Its limit is determined by reference to
what is fair to both
parties. In Maynard v. Goode (1926) 37 CLR, at p 539 , Isaacs J. denied that
the purchaser was entitled to such
a time for the transfer of his block to go
through as would be unfair to the vendor: "I think, as I have said, that
'reasonable time'
connotes as a limit the unfairness of further delay to the
vendor." That limit is co-extensive with the limit beyond which equity
would
not go in giving relief to a purchaser in default. His Honour continued (1926)
37 CLR, at pp 539-540 :
"If that is right, the legal and the equitable standard is the same. If,
however, a more rigid legal standard is to be applied
to the construction of
the words, something further may be necessary. If, for instance, as urged,
Goode must be regarded as the only
contemplated transferor and, therefore,
unable to call in aid the minority of John Edgar Evel Goode as a valid
element in the measure
of reasonable time, then the contention becomes a
claim for strict time limit. In that case the equitable doctrine of time not
being
primarily of the essence would apply, because there are no reasons for
displacing it (Tilley v. Thomas (1867) LR 3 Ch 61 ). Whichever
way this
point is viewed, it fails."
It is not necessary in this case to consider whether equitable rules will give
relief to either party when a fixed time for the fulfilment
of a contingent
condition expires. Neither Maugham J. in In re Sandwell Park Colliery Co.;
Field v. The Company (1929) 1 Ch 277,
at p 282 nor the Judicial Committee in
Aberfoyle Plantations (1960) AC, at p 125 thought that they did. Of present
relevance is the
observation of Isaacs J. that there is no conflict between
law and equity as to the measure of time which is reasonable for the
fulfilment
of a contingent condition. In Tilley v. Thomas (1867) LR 3 Ch, at p
67 , Lord Cairns L.J. said:
"The legal construction of the contract is, . . . and must be, in equity
the same as in a Court of law. A Court of equity
will indeed relieve
against, and enforce, specific performance, notwithstanding a failure to
keep the dates assigned by the
contract, either for completion, or for the
steps toward completion, if it can do justice between the parties, and if
(as Lord
Justice Turner said in Roberts v. Berry (1853) 3 DGM & G 284 (43
ER 112) ), there is nothing in the 'express stipulations
between the
parties, the nature of the property, or the surrounding circumstances,'
which would make it inequitable to interfere
with and modify the legal
right. This is what is meant, and all that is meant, when it is said that
in equity time is not of
the essence of the contract."
This passage was cited with approval by Lord Edmund-Davies in Raineri v. Miles
(1981) AC 1050, at p 1082 . Whether one adopts a strict
or an equitable
construction - to adopt the dichotomy in the judgment of Isaacs J. - the time
for fulfilling the contingent condition
expires when further extension would
be inequitable. (at p569)
14. Needham J. expresses no error of principle in ascertaining when the reasonable time expired, but it was submitted that upon the facts his finding should be set aside. It appears that the Lilli Pilli property, which was on the waterfront, had some unattractive features and that it was hard to sell waterfront properties in the winter months which intervened between the exchange of contracts in April and the issue of the summons at the end of September. The disadvantages are material to the price which the property might reasonably be expected to fetch and his Honour found that the price sought by the purchasers before January 1979 was unreasonably high. That finding can hardly be challenged in the light of the price obtained for the property when the sale was made in March 1979. As to the unfavourable winter market, the vendor could not reasonably have been expected to allow the winter months to pass in order that the purchasers could have the benefit of the more favourable sale prospects of the ensuing summer. There is no reason to disturb his Honour's finding. Upon that finding, the time for fulfilment of the stipulation expired by September 1978. (at p569)
15. Then it was submitted that the vendor could not avoid the contract unless it had given a notice to complete and the notice had not been complied with. The notice of 17 July 1978 was given before the expiration of the time limited for fulfilment of the stipulation and called for performance of the contract before the expiration of that time. Further, it was submitted, the vendor seeking to avoid the contract was bound to give a notice to complete after that time expires, affording the purchasers a further reasonable time for compliance with the demand in the notice. These submissions suggest a confusion between the consequence of non-fulfilment of a contingent condition and the consequence of breach of a promissory term. A notice to complete insists upon performance by a party in default to whom the notice is given of an obligation binding upon him. It can have no application to a situation where the party to whom it is given is under no obligation to perform. And here, of course, the vendor was not seeking performance by the purchaser after 10 August 1978. (at p569)
16. In the present case, when the time limited for fulfilment of the stipulation passed, the purchasers did not come under an obligation to complete. That obligation remained contingent on their completion of a sale of the Lilli Pilli property. The vendor was then entitled to say: "As you have not completed the sale of your Lilli Pilli property, our contract is still contingent. I have waited long enough. Our sale is off." Thereafter, the vendor was not seeking to rescind the contract for breach by the purchasers of their obligations; it was seeking to rescind the contract because the event upon which the obligations of both parties were conditioned had not occurred. The ground on which it sought to rescind the contract affected the formation of obligations to complete, not their performance. No notice to complete was called for. (at p570)
17. It cannot be argued that it was inequitable for the vendor to avoid the contract without giving a further notice of its intention to do so. By its notice of 10 August 1978, it purported to avoid the contract on the ground that the time for fulfilment of the stipulation had expired. It did not resile from that position at any time. The purchasers had adequate notice that the vendor intended to avoid the contract if the stipulation were not fulfilled within a reasonable time. By September 1978 it had become inequitable to hold the vendor to the contract, and it elected to avoid it. It is not necessary to determine whether the notice of 10 August 1978 had a continuing operation, so that when the reasonable time for fulfilment of the stipulation expired the vendor's entitlement to avoid the contract was exercised. On 29 September 1978, after that time expired, the vendor issued and served its summons. That was clear notice of its election to avoid the contract if the election had not been made earlier. A summons does not in itself affect the rights of the parties, but its issue and service may involve an election which affects those rights (Ogle v. Comboyuro Investments Pty. Ltd. [1976] HCA 21; (1976) 136 CLR 444, at p 460 ). (at p570)
18. The contract was avoided. The purchasers' waiver of the stipulation came too late. Its cross-claim for specific performance therefore fails. The return of the deposit to the purchasers was consented to and no question as to that arises on this appeal. The appeal should be dismissed with costs. (at p570)
ORDER
Appeal dismissed with costs.
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/HCA/1982/29.html